Krypton Industries Ltd

1. We have audited the attached Balance Sheet of KRYPTON INDUSTRIES LIMITED, asat 31^st March, 2010 and also the Profit and Loss Account and the Cash FlowStatement for the year ended on that date, annexed thereto. These financial statements arethe responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 as amended byCompanies (Auditor’s reports) (Amendment) Order, 2004(together the ‘Order’)issued by the Central Government of India in terms of sub-section (4A) of section 227 ofthe Companies Act, 1956, we enclose in the Annexure, a statement on the matters specifiedin paragraphs 4 and 5 of the said order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we reportthat :

i) We have obtained all the information and explanations which, to the best of ourknowledge and belief were necessary for the purpose of our audit ;

ii) In our opinion, proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;

iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of Account,

iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the Accounting Standards referred to in sub-section(3C) of section 211 of the Companies Act, 1956.

v) On the basis of written representations received from the directors as on 31^stMarch, 2010, and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31^st March, 2010 from being appointed as adirector in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act,1956.

vi) In our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts, read together with the notes thereon, give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fairview, in conformity with the accounting principles generally accepted in India;

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31^stMarch, 2010;

b) in the case of the Profit and Loss Account, of the Profit of the Company for theyear ended on that date; and

c) in the case of Cash Flow Statement, of the Cash Flows for the year ended on thatdate.

ANNEXURE TO THE AUDITORS’ REPORT

Annexure referred to in paragraph ‘3’ of our Report of even date on theaccounts of KRYPTON INDUSTRIES LIMITED as at and for the year ended 31^stMarch, 2010.

(i) (a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of fixed assets.

(b) As per Company’s policy, verification of fixed assets is being conducted in aphased programme by the management designed to cover all assets over a period of fiveyears, which in our opinion is reasonable having regard to the size of the Company and thenature of assets. The verification of assets due as per this programme has been carriedout. The discrepancies noticed on such verification were not material and have beenproperly dealt with in the books of account.

(c) The Company has not disposed off a substantial part of its fixed assets during theyear and the going concern assumption of the company is not affected.

(ii) (a) During the year, the inventories have been physically verified by themanagement. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanation given to us, theprocedures of physical verification of inventories followed by the management arereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) On the basis of our examination of the record of inventories, we are of the opinionthat, the Company is maintaining proper records of inventories. The discrepancies noticedon physical verification of inventories as compared to book records were not material andhave been properly dealt with in the books of account.

(iii) (a) The Company has granted unsecured loan to its subsidiary company covered inthe register maintained under section 301 of the Companies Act, 1956. The maximum amountinvolved during the year was Rs.7776.36 (in’000) and the year ended balance of loangranted to such party was Rs.7776.36 (in’000).

(b) In our opinion the rate of interest and other terms & conditions on which loanhas been taken from the party listed in the register maintained under section 301 of theCompanies Act, 1956 are not prima facie, prejudicial of the interest of the Company.

(c) The receipt of principal amounts and interest during the year has been regular/asper stipulation.

(d) The Company had taken unsecured loan from subsidiary company covered in theregister maintained under section 301 of the Companies Act, 1956. The maximum amountinvolved during the year was Rs.124.94 (in’000) and the year ended balance of loantaken/interest from such party was Rs.124.94 (in’ 000).

(e) In our opinion the rate of interest and other terms & conditions on which loanhas been taken from the party listed in the register maintained under section 301 of theCompanies Act, 1956 are not prima facie, prejudicial of the interest of the Company.

(f) The payment of principal amounts and interest in respect of such loans during theyear has been regular/as per stipulation.

(iv) According to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Company and the nature ofits business with regard to purchases of inventories, fixed assets and with regard to thesale of goods & services. During the course of our audit, no major weakness has beennoticed in the underlying internal controls.

(v) (a) Based on the Audit Procedure applied by us and according to information andexplanations given to us, the particulars of contracts or arrangements referred to insection 301 of the Act have been entered in the register required to be maintained underthat section.

(b) In our opinion and according to information and explanation given to us , thetransactions made in pursuance of such contracts have been made at prices which arereasonable having regard to prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposit within the meaning of section 58A, 58AAor any other relevant provisions of the Act and the rules framed thereunder.

(vii) That Company has an internal audit system, which in our opinion, is commensuratewith its size and nature of its business.

(viii) To the best of our knowledge and the information given to us, the CentralGovernment of India has not prescribed the maintenance of Cost records by the Companyunder Section 209(1)(d) of the Companies Act, 1956 for any of its products.

(ix) (a) As explained to us, the statutory dues payable by the Company comprises ofprovident fund, employees’ state insurance, income tax, sales tax, custom duty,excise duty, cess and etc. According to the records of the Company and information andexplanations given to us, the Company has been regularly depositing the aforesaidundisputed statutory dues with the appropriate authorities. There are no undisputedstatutory dues as referred to above as at 31^st March, 2010 outstanding for aperiod of more than six months from the date they become payable.

(b) According to the records of the Company and information and explanations given tous, there are dues of income – tax aggregating Rs.32,49,186/-, which have not beendeposited on account disputes, the details of which are set out in note No. 16(6).

(x) The Company has no accumulated losses and has not incurred any cash losses duringthe financial year covered by our audit or in the immediately preceding financial year.

(xi) Based on our audit procedures and on the information and explanations given by themanagement, we are of the opinion that, the Company has not defaulted in repayment of duesto banks. The Company has not taken loans from financial institutions and has not issueddebentures.

(xii) As Company has not granted any loans and advances on the basis of security by wayof pledge of shares, debentures and other securities, paragraph 4(xii) of the Order is notapplicable.

(xiii) As the Company is not a chit fund / nidhi / mutual benefit funds / society.Therefore, the provisions of paragraph 4(xiii) of the Order are not applicable to theCompany.

(xiv) As the Company is not dealing or trading in shares, securities, debentures andother investments, paragraph 4(xiv) of the Order is not applicable.

(xv) In respect of guarantees given by the Company for loans taken by its subsidiariesfrom banks, the terms and conditions are prima facie not prejudicial to the interest ofthe Company.

(xvi) In our opinion, the Term Loan, have been applied for the purpose for which theywere obtained.

(xvii)According to the information and explanations given to us and on an overallexamination of the balance sheet of the company, we report that the no funds raised onshort – terms basis have been used for long – term investment except permanentworking capital.

(xviii) As the Company has not made preferential allotment of shares to parties andcompanies covered in the register maintained under section 301 of the Act, paragraph4(xviii) of the Order is not applicable.

(xix) As the Company has not issued any debentures, paragraph 4(xix) of the Order isnot applicable.

(xx) During the year, since the Company has not raised money by way of public issue,paragraph 4(xx) of the Order is not applicable.

(xxi) Based upon the audit procedures performed and information and explanations givenby the management, we report that, no fraud on or by the Company has been noticed orreported during the course of our audit for the year ended 31^st March, 2010.